Sad to say, it’s becoming increasingly clear that the national housing picture has turned much more gory than anyone might have imagined; likewise, repeated Wall Street forecasts that a meaningful housing rebound will kick off by mid-2008 appear to have little or no legitimacy.

Some housing industry experts suggest the implications are ominous, that the worsening housing slump will accelerate the likelihood of a recession despite a rise in the number of working Americans, and will play havoc with the stock market.

Taking note of the growing number of negative housing stories appearing on TV and in newspapers, a veteran real estate developer, Robert Sheridan, tells me: “The press, unlike Wall Street, is finally getting the message. Housing is not in a slump, but in a deepening recession that has at least another two to four years to run; it’s also in the midst of a serious readjustment of prices.”

He figures that the readjustment will eventually see prices of single-family homes plummet 10% to 20% and condominiums tumble 20% to 40%. “The picture is getting darker and darker by the day,” he says. “Turning around housing will be like turning around a battleship.”

Further, the CEO of Chicago-based Robert Sheridan & Partners, who has been developing homes around the country since 1975, says he believes it will take another year or two before the mortgage market stabilizes. He also sees at least 2 million foreclosures over the next two years.

Ridiculing repeated Wall Street forecasts of a second-half turnaround in 2008, Mr. Sheridan argues: “They’re dead wrong; the forecasters must be smoking something.”

The latest worrisome housing trends and figures strongly indicate the Street may indeed be way too euphoric about an impending recovery. In brief:

• Amid slowing housing demand, a near record 4.45 million existing homes are on the market, versus roughly 2.5 million in the late 1990s.

• Foreclosure filings are ballooning. There were 224,451 in October, up 94% from October 2006.

• New home prices last month fell 13% from year-earlier levels, the biggest drop since 1970, while the median price of existing homes dropped 5.1%, the single largest monthly decline ever.

• A recent Federal Reserve study shows a record 40.8% of lenders have tightened their lending standards on prime mortgages, which should further depress housing sales.

• At the end of September, about 6% of mortgage borrowers were behind in their payments, according to the Mortgage Bankers Association. That’s up from 4.6% a year earlier, and it’s the worst reading since 1986.

• A record 0.78% of all American mortgages entered foreclosure in the September quarter, and the overall foreclosure rate jumped to 1.69%, the highest since 1982.

• Estimates are making the rounds that over the next year new home prices will drop 13%, while existing home prices will fall 15%.

Reflecting these developments, investment adviser Michael Larson, a dogged housing industry tracker, concludes that the housing downturn has at least another year to go and could easily spill over into 2009. As a result, he sees further sales weakness and at least another 5% to 10% decline in home prices. “I think the sellers are finally getting the message and cutting prices,” he says.

He takes a dim view of the government’s plan to ease the crisis by freezing rates on subprime mortgages. “That’s no panacea, certainly not a cure-all,” Mr. Larson, associate editor of the Safe Money Report, a monthly newsletter in Jupiter, Fla., says. “It’s difficult to see how you’re going to get everyone on the same page,” he observes, referring to such participants as the developer, banker, investor, and those who service the mortgage. “You have to get a lot of parties to agree to a freeze; it won’t be easy.” He further notes that 40% to 60% of homeowners whose loans are modified eventually still default.

Some smaller homebuilders have already filed for bankruptcy, and Mr. Larsen looks for more of the same from the larger publicly owned ranks. In particular, he points to Standard Pacific and Beazer Homes. His newsletter has already expressed similar sentiments about troubled Countrywide Financial, the country’s largest mortgage lender.

Making matters worse, the mortgage and housing crises, Mr. Larson says, could cost investors and banks some $400 billion from write-downs and losses on mortgage-related securities. He further cites estimated total losses to household wealth of between $2 trillion and $4 trillion.

It all sounds pretty ugly, but our two housing bears see an even uglier tone, with both telling me “the worst is yet to come.”

dandordan@aol.com